Global Investment Management

Types of Foreign Bonds

Yankee Bonds

Yankee Bonds are US dollar denominated issues by foreign  borrowers (usually foreign governments or entities,  supranationals and highly rated corporate borrowers) in  the US bond markets. Yankee bond has certain peculiar  features associated with the US domestic market. SEC  regulates the international bond issues and requires  complete disclosure documents in detail than the  prospectus used in Eurobond issues. Foreign borrower will have to adopt the US accounting practices and the  US credit rating agencies will have to provide rating for  these bonds. These bonds are sponsored by a US  domestic underwriting syndicate and require SEBI (Securities  and Exchange Board of India) registration prior to selling them in  the domestic US market.… Read the rest

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Euro Notes and Euro Commercial Paper

Euro Notes

Euro Notes are like promissory notes issued by companies for obtaining short term  funds. They emerged in early 1980s with growing securitization in the international financial  market. They are denominated in any currency other than the currency of the country where  they are issued. They represent low cost funding route. Documentation facilities are the  minimum. They can be easily tailored to suit the requirements of different kinds of  borrowers. Investors too prefer them in view of short maturity.

When the issuer plans to issue Euro notes, it hires the services of facility agents or the  lead arranger. On the advice of the lead arranger, it issues the notes, gets them underwritten  and sells them through the placement agents.… Read the rest

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International Bonds

International bonds are a debt instrument. They are issued by international agencies,  governments and companies for borrowing foreign currency for a specified period of time.  The issuer pays interest to the creditor and makes repayment of capital. There are different  types of such bonds. The procedure of issue is very specific. All these need some explanation  here.

Types of International Bonds 1. Foreign Bonds and Euro Bonds

International bonds are classified as foreign bonds and Euro bonds. There is a  difference between the two, primarily on four counts. First, in the case of foreign bond, the  issuer selects a foreign financial market where the bonds are issued in the currency of that  very country.… Read the rest

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The Development of the Eurodollar Market

Euro Markets are unregulated Money and Capital markets. These markets are spread over  Europe, Middle East and Asia. Short-term Euro markets are called as “Euro- currency  Markets”. Any currency held outside to home country is referred to as Euro-currency. For  example when a Dollar is held as a deposit outside the U.S. is  referred  to as Euro-Dollar,  Similarly a deposit in Marks, outside Germany is called as a Euro-Mark deposit.

The Dollar was and still is widely used to settle the international payments. Although  there is an increase in European Deposits, denominated in Euro, Pound  sterling, Yen etc.,… Read the rest

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International Equity Investments – Euro Equities

International equities or the Euro equities do not represent debt, nor do they represent  foreign direct investment. They are comparatively a new financial instruments representing foreign  portfolio equity investment. In this case, the investor gets the dividend and not the interest as  in case of debt instruments. On the other hand, it does not have the same pattern of voting  right that it does have in the case of foreign direct investment. In fact, international equities  are a compromise between the debt and the foreign direct investment. They are the  instruments that are presently on the preference list of the investors as well as the issuers.… Read the rest

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Demand and Supply for Foreign Exchange

The foreign exchange rate is determined in the free foreign exchange  markets by the forces of ‘demand and supply for foreign exchange’. To make  the demand and supply functions to foreign exchange, like the conventional  market demand and supply functions, we define the rate of exchange as the price  of one unit of the foreign currency expressed in terms of the units of the home  currency.

The Demand for Foreign Exchange

Generally, the demand for foreign currency arises from the traders who  have to make payments for imported goods. If a person wants to invest his  capital in foreign countries, he requires the currency of that country.… Read the rest

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